Summary of the ISDP Forum Pulling the Breaks: Regulating Chinese FDI in the EU

Earlier this fall, the European Commission announced plans to start regulating Chinese FDI in the EU. On September 29th, ISDP arranged a panel discussion to discuss and debate how these new FDI regulations might function, if they are necessary and who are the winners and losers from them.

Participating in the panel were three distinguished speakers:

Mr. Bruno Bruno Maçães, Senior Adviser at Flint Global and former Minister for Europe in the Portuguese government;

Dr. Angela Stanzel, Policy Fellow and editor of China Analysis at the European Council on Foreign Relations (ECFR); and

Ms. Carolina Dackö, Specialist Counsel at Mannheimer Swartling.

Watch the video below:

The members of the panel held an exhaustive discussion on the subject, covering aspects ranging from the reason for the implementation of the screening, to legal concerns, to China’s reaction.

In line with France, Germany and Italy’s initiative earlier this year, the European Commission is in favor of implementing screening mechanisms due to a recent increase in Chinese FDI. In merely 4 years, China’s shares of European companies has risen to $85 million, and in 2016 alone, Chinese investors have spent more than the last 10 years combined in acquisition and FDI in Europe. As the main recipient of Chinese FDI, the EU is concerned, Dr. Stanzel said.

Ms. Dackö went on stating that the screening is rather “toothless” due to its non-binding nature. This leaves room for newly elected leaders and governments to freely alter the rules of the FDI mechanism. Moreover, countries can decide themselves how they want to implement the FDI framework. Sweden, for instance, does not have any regulating frameworks for FDI.

Following this, Dr. Stanzel discussed the potential effects of the FDI screening. She stated that China has criticized the screening as “confusing and hostile”, claiming that the EU is closing its doors to foreign investments. Nevertheless, EU member states are concerned about issues related to reciprocity, free-market economy and fairness in trade. Dr. Stanzel also raised concerns over issues such as unfair competition, subsidized funding and transparency. She used the example of the Kuka case, where China used state capital to purchase a private German company.

Mr. Maçães mentioned the overlapping nature the EU and the 16+1 cooperation framework. Even though Beijing apparently respects international market rules, it does not implement them domestically. Mr. Maçães suggests that if companies want to do businesses in the EU single market, the Union should be able to determine if market rules are respected from the start.

The EU is facing new economic and legal challenges that have extended beyond national security. In regard of the increased Chinese FDI and the non-binding nature of the screening, the effects of the mechanism remains to be seen. The forum was concluded with an open Q&A session covering topics such as the financial crisis and the relationship between Beijing and Washington. ISDP wishes to thank all speakers and members of the audience for contributing to a fruitful discussion.